What are we talking about, when we talk about the gig economy?
For many people, what springs immediately to mind is the army of drivers, deliverers, apartment renters, launderers and their like who make up the so-called on-demand or sharing economy. Exhibit A: Uber.
Turns out, though, that the term is a lot more complicated than that. In its most basic definition, a “gig worker” is simply an independent contractor — a person offering his or her skills on a freelance basis. Seen in that light, the gig economy is nothing new. Its origins are as old as work itself.
That said, the coming of Uber, Lyft, Airbnb and similar ventures has served to shine a light on the world of independent workers, raising serious questions about their economic status and long-term job security. The very word “gig,” which has its roots in musical performance, suggests a one-off experience that hardly offers steady remuneration for the provider of the service in question.
Marion McGovern is author of Thriving in the Gig Economy: How to Capitalize and Compete in the New World of Work. As a longtime entrepreneur in that sector, she has her own particular definition of “gig economy.”
“It’s work of uncertain duration for more than one client or employer,” McGovern says. She excludes aspects of the sharing economy that don’t involve the performance of work, such as the temporary offering of private homes through platforms such as Airbnb.
McGovern differentiates among three distinct “economies”: gig, on demand, and sharing. Uber falls into all three categories, but more traditional freelance work doesn’t necessarily involve any “sharing” at all. In fact, says McGovern, highly skilled independent experts such as data scientists, lawyers and management consultants might not identify themselves as gig workers at all.
Adding to the confusion is a panoply of data that’s hard to make sense of, given the varying definitions of gig work. With the government having stopped collecting relevant data back in 2005, the task has fallen to private think tanks like McKinsey Global Institute and the Brookings Institution, and freelancing platforms like Upwork Global Inc. McKinsey, for one, includes in its definition individuals who sell on eBay, regardless of whether their wares involve an actual business or family heirlooms. Says McGovern: “There’s noise in everybody’s data.”
Let’s simplify the discussion, and say that gig workers are freelance providers of personal services. While there’s nothing new about that, McGovern says the modern-day gig economy has become more accessible and in the public eye than in the past. With the success of intermediary platforms such as Upwork and Fiverr, startups today can easily access additional development talent. Thirty years ago, when McGovern founded M Square Consulting as a source of independent consulting talent, “we had to educate people [about the option],” she says.
Gig work might well be an established presence, but its more recent surge has given rise to fresh concerns about the individuals who perform it. Numerous companies have been accused of misclassifying steady workers as independents, in the process denying them benefits. Microsoft is just one of the major accused miscreants to have paid out millions of dollars in damages to “temporary” employees over the years.
Advocacy organizations, and even a few lawmakers, have stepped up with proposals to protect the gig sector. Earlier this year, Sen. Mark Warner (D-Va.) introduced legislation to create a $20m fund to create “portable benefits” for independent workers. A similar bill was offered in the House of Representatives by Suzan DelBene (D-Wa.). The Freelancers Union has undertaken a pilot project to help independents secure medical insurance and other key benefits.
MBO Partners has proposed the formal designation of Certified Self-Employed (CSE) to offset the risk of hiring independent talent. Holders of that title could be professionally licensed under the oversight of the U.S. Small Business Administration.
Meanwhile, New York City earlier this year enacted the Freelance Isn’t Free Act, providing independent workers with protections such as written contracts, “timely and full” payment, and a shield against employer retaliation.
Such measures could go a ways toward preventing the creation of a new service class of workers, doing menial work and lacking basic job protection. One fear is that the gig economy will split into two distinct classes, one for those who perform work that requires little training, and the other for high-level professionals. Because they are so much in demand, the latter would be in a far better position to define the terms of their employment, and avoid being exploited for their talents.
Marco Zappacosta, co-founder and chief executive officer of Thumbtack, has identified a potential third class of gig worker — individuals with the skills required to perform non-routine services that can’t be automated. They include plumbers, electricians and gardeners. “He views that personal-services dimension as an enormous class of opportunity,” McGovern says.
Regardless of how the gig economy will eventually shake out, there’s no avoiding its impact. McGovern says the nation’s education system must adjust its curricula accordingly. Students can no longer wait until business school to learn basic entrepreneurial skills. The topic has to come up in high school, and possibly earlier.
Some experts see up to 70 percent of individuals engaging in freelance services at some point in their lives. The gig economy is here to stay, but to ensure the security and well being of its participants, action must be taken on multiple fronts.